AAII Sentiment Survey: Steady Optimism Remains Above Average

Optimism among individual investors about the short-term direction of the stock market remained above its long-term average for the seventh consecutive week, according to the latest AAII Sentiment Survey. Although above the long-term average, bullish sentiment fell slightly compared to last week. Neutral sentiment also declined this week, while pessimism rose.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.4 percentage points to 41.8%. This week now ties the seven-week stretch that the bullish sentiment stayed above its historical average of 39% between November 28, 2013, and January 9, 2014. The next record will be surpassing the 14-week stretch between December 29, 2011, and March 29, 2012.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 4.9 percentage points to 29.9%. This puts the neutral sentiment below its historical average of 30.5%, breaking the three-week streak.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 5.2 percentage points to 28.2%. This increase pushes the bearish sentiment reading closer to its historical average of 30.5%. Bearish sentiment last passed its historical average level on August 7, 2014.

Keeping many individual investors optimistic about the short-term direction of stock prices is the S&P 500’s overall upward momentum, earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Causing other AAII members to be pessimistic are prevailing valuations, the failure of the S&P 500 to set new highs, events in the Middle East and Ukraine, the pace of economic growth and Washington politics.

This week’s AAII Sentiment Survey results:

Bullish: 41.8%, down 0.4 percentage points

Neutral: 29.9%, down 4.9 percentage points

Bearish: 28.2%, up 5.2 percentage points

Historical averages:

Bullish: 39.0%

Neutral: 30.5%

Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.